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Conflicting testimony about who directed removal of liquid natural gas information from report

Charles Bown (right) was deputy minister of Natural Resources when the Muskrat Falls project was sanctioned in 2012. He is seen here at the Muskrat Falls inquiry Wednesday with his lawyer, Andrew Fitzgerald, and inquiry co-counsel Barry Learmonth (left). (Terry Roberts/CBC)

A lawyer at the Muskrat Falls inquiry says a report that looked favourably upon importing liquid natural gas (LNG) as an option for Newfoundland's future electricity needs was suppressed, and there might be "sinister" reasons behind the decision.

Barry Learmonth is co-counsel at the inquiry, and he's not afraid to inject his own theories about how the planning for Muskrat Falls unfolded.

This week he was trying to find out why a 2012 report by Wood Mackenzie was substantially altered before it was released to the public, and who made the decision.

His questions resulted in plenty of finger-pointing, some uncomfortable testimony for a senior government bureaucrat, and several "I don't know" replies from a former high-profile politician, Jerome Kennedy, who helped lead the charge to sanction Muskrat Falls six years ago.

This led Learmonth to offer his own explanation.

"I suggest to you the reason is it gave a much more favourable consideration to LNG and the government was determined to eliminate all options other than Muskrat Falls, and therefore this had to go."

Bruneau stirs the pot

The issue involves some intense debate in 2012 about whether natural gas was a viable option, using either a pipeline to the Jeanne d'Arc Basin to tap into the supply of gas being produced by oil platforms in the offshore, or importing liquid natural gas from external sources.

Government-owned Nalcor had earlier screened out the gas option, and only compared Muskrat Falls and the isolated island power grid to determine which was the least-cost option.

Former Natural Resources minister Jerome Kennedy (left) is seen chatting with his former deputy minister, Charles Bown (right), at the Muskrat Falls inquiry Wednesday. In the middle is Kennedy's lawyer, Tommy Williams. (Terry Roberts/CBC)

An analysis by Nalcor determined Muskrat was the preferred choice, and the project was sanctioned at a cost of $6.2 billion in late 2012.

But an engineering professor at Memorial University, Stephen Bruneau, raised doubts earlier that year after giving an attention-grabbing presentation that touted the potential of offshore gas.

Stephen Bruneau is an engineering professor at Memorial University in St. John's. (Terry Roberts/CBC)

In response, government hired a company called Ziff Energy to review those options, and its findings determined neither domestic gas nor LNG were feasible.

But the issue didn't end there. Government then hired another firm, Wood Mackenzie, to review and comment on the Ziff report.

Wood Mackenzie came back with some dramatically lower cost estimates for the LNG option, potentially making it a cheaper alternative to maintaining the isolated island grid.

'Manipulating the message'

But all references to LNG were removed from the Wood Mackenzie report before it was released publicly, and Learmonth seized on this, accusing government of "cherrypicking" and "manipulating the message" at a time when debate was raging about Muskrat Falls.

Learmonth went so far as to say the reviews were not an honest assessment, but a process designed to eliminate natural gas.

"The conduct in suppressing that report is not consistent with an open, objective assessment," Learmonth stated.

'No explanation'

So who made the call to pare down the report?

Was it Jerome Kennedy, the outspoken former politician who served as minister of Natural Resources when Muskrat Falls was sanctioned?

"I can offer no explanation," Kennedy replied following repeated questions from Learmonth on Wednesday morning.

Jerome Kennedy was minister of Natural Resources when the controversial Muskrat Falls hydroelectric project was sanctioned in 2012. (Terry Roberts/CBC)

Kennedy said "I was trying to get everything out there."

But Kennedy offered his own theory. Perhaps it was Jim Keating, the vice-president of oil and gas with Nalcor.

Evidence shows Keating took quite an interest in the review, including an October 2012 email to a government official in which he wrote: "WM (Wood Mackenzie) should say they were to comment only on the pipeline piece."

Whether or not that had undue influence, sir, or had influence in terms of the decision being made, I don't know.- Jerome Kennedy

"Whether or not that had undue influence, sir, or had influence in terms of the decision being made, I don't know," Kennedy said of Keating's email.

But in a series of messages with CBC News on Wednesday, Keating denied any involvement.

"I did not direct any removal," he said.

Keating said he was asked to review the report for "accuracy and completeness," and then added: "I understood I was to receive a report about (Wood Mackenzie's) review of the pipeline option; not LNG.

"I understood that government had asked only for a pipeline review, therefore I was surprised to see the LNG comments, but it mattered not to me."

'Minister Kennedy was all over these papers'

The clearest answer came from Charles Bown, the deputy minister of Natural Resources at the time Muskrat Falls was sanctioned.

Bown was a key liaison between government and Nalcor during the planning and sanctioning phase, and his name has come up numerous times during the inquiry.

He took the witness stand on Wednesday, and was also pressed for answers by Learmonth on the Wood Mackenzie report.

Charles Bown is currently the chief executive of the major projects and initiatives unit with the Government of Newfoundland and Labrador. (Terry Roberts/CBC)

After some reluctance, Bown offered this:

"I would say, with the best of my recollection, that that direction would have come from Minister Kennedy," Bown said of his former boss.

But Bown quickly left open the option that someone else might have influenced Kennedy, saying, "Whether he had conversations with other people over the weekend, when I had provided that copy of the work to him, that I can't verify."

When asked why the information was removed, Bown said the explanation was that public debate was around the issue of a pipeline to the offshore, and the focus should remain on that issue.

Bown said he had no issue with the original report, since "I didn't think the points that they raised were so bad as to change the decision on whether Muskrat Falls was the least cost choice."

Kennedy, meanwhile, concluded his testimony and left the province on a previously scheduled flight Wednesday.